Sometimes it takes a refresh of knowledge to make you think differently about something you already know…or should I say think you know!
This is what happened to me last week when attending a Finance Masterclass and returning to the importance of knowing the numbers in your business.
I’m not great at Maths – never have been – but when I started bookkeeping for people, I started to fall in love with numbers and the information you can get from them.
In my own business (and in my life too), I love the time sat in front of my spreadsheet looking at what those numbers really mean.
My brain is wired a little more for creativity than maths so, to overcome my fear of getting the numbers wrong, I started to look for the story within them (sounds cheesy doesn’t it?!).
This has really helped me to interpret what they mean! I have an accountant and software that can do the ‘complicated’ maths for me so what I have learned to do is to look for the trends, the common thread and the red flags that might need attention.
A lot of business owners (especially the ones who don’t like maths!) might only look at their numbers once a year when the accountant sends them their final accounts and their tax bill arrives.
But if there is one thing you take from this blog post, let it be this; You should be looking at your numbers quarterly (at a minimum) and if you can, weekly. That doesn’t mean you need a full set of accounts each month but it does mean you should have the right reports in place so that you are on top of where you are and to ensure you aren’t always relying on historical data to make decisions.
Every business will have a different set of numbers that they need to report on regularly, but one that they should all know is their cash position. If you don’t know any other numbers, you should know how much cash you have. One of the main reasons business fail is a lack of cash so get to know this number.
Remember that cash is not just about what is in the bank, it’s what you owe your suppliers and what your customers owe you – what’s your net cash position not your bank balance?!
A cash flow forecast can help you to look at this with more clarity. Forecasting isn’t always easy. We don’t have a crystal ball to foresee what’s ahead (remember March 2020?!) but with a combination of accurate historical data, clear financial goals and a vision for your life and your business, you can create a forecast that can give you the numbers needed to make great decisions based on fact rather than fiction.
So, what’s the moral of this story?
For those that love numbers, it might sound simple but for those that avoid them, you need to find a way to make those numbers makes sense to you so that you can find the story within them. Like all good stories, there will be twists and turns but with accurate information, you can keep adding chapters to the book of your business that include growth, increased profits and a business that works without you.
If you need help to get to know your numbers, or if you know them but want some help to get them to where you want them to be, please contact us on 01527 757 910.